Is the government dismantling Operation Car Wash?

The famous anti-corruption investigation is losing public support, amid claims that Jair Bolsonaro’s Prosecutor General is trying to neuter the probe. The arrests and prosecutions of Operation Car Wash used to be the talk of the town in Brazil, dominating nightly news shows and the morning headlines. But with the constant crises over the last 18 months, compounded by the Covid-19 pandemic, Operation Car Wash increasingly feels like an afterthought, pushed further and further away from the front pages. Hit by media revelations about misdeeds, partisanship, and profiteering, the task force — as well as its main public face, former judge (and former Justice Minister) Sergio Moro — is looking for new credibility to keep their project and political ambitions alive.[restricted]

While it still has considerable public support, Operation Car Wash is no longer seen as a bipartisan anti-corruption crusade to modernize Brazil’s dysfunctional and unscrupulous state. Its supporters, along with those of Mr. Moro, are now protesting against Mr. Bolsonaro, whose election was largely ensured by the work of the probe and its leading judge.

Furthermore, Operation Car Wash can no longer count on the degree of uncritical media support it once had, leaving its enemies in Congress and the Supreme Court empowered to bleed its powers dry. As a latest example, House Speaker Rodrigo Maia and current Supreme Court Chief Justice Dias Toffoli are looking to pass a political quarantine that would bar former magistrates from seeking electoral office for eight years if they chose to leave the judiciary. Depending on the exact provisions of the legislation, this could effectively put an end to Mr. Moro’s political ambitions, which The Brazilian Report has covered extensively.

There is also some suggestion that the lead investigator of the Car Wash taskforce, federal prosecutor Deltan Dallagnol, may be forced out in the near future by Jair Bolsonaro’s handpicked Prosecutor General Augusto Aras, who has accused the Car Wash taskforce of illegally investigating 38,000 Brazilian citizens.

On the weekend, Car Wash prosecutor Roberson Pozzobon claimed Mr. Aras was trying to dismantle the investigation, saying that “the beautiful institutional structure of the Federal Prosecution Service […] is under threat of being blatantly erased.” 

A last gasp for credibility

Given the degree of opposition among Brazil’s political class and the declining popularity of the investigation, Operation Car Wash has been trying its best to save face and regain some of its old swagger by going after former Health and Foreign Minister and Brazilian Social Democratic Party (PSDB) presidential candidate Senator José Serra.

Operation Car Wash critics have frequently accused prosecutors of protecting the PSDB. Among a series of revelations from The Intercept Brasil’s Car Wash Leaks exposé was that Sérgio Moro had quashed an investigation into the dealings of former President Fernando Henrique Cardoso, a leading figure of the PSDB. Now, by going after one of the founding members of the party in Mr. Serra, the Car Wash taskforce is seeking to regain some of its credibility as a genuinely non-partisan effort.

Mr. Serra has been a constant fixture on the political scene since his days as a student leader in the 1960s, though his brand of social democratic politics are on their way out. He is also widely seen as corrupt, thanks in part to his shoddy spell as Foreign Minister under the Michel Temer government. If he goes down, it further weakens the already in decline PSDB, as The Brazilian Report explained, perhaps further empowering the ascendant faction in the party led by São Paulo Governor João Doria. 

This wing of the PSDB lacks any of the party’s social concerns or founding principles. Mr. Doria, for instance, campaigned under the “Bolsodoria” slogan in 2018, seeking to associate himself with Jair Bolsonaro’s presidential campaign. Since then, Mr. Doria has become one of Mr. Bolsonaro’s main political enemies, despite sharing many of the same policies, especially in regards to public security and the economy. 

A potential alliance between Mr. Doria and Sergio Moro could prove to be a winning one in 2022. Providing Mr. Moro is allowed to hold political office and Operation Car Wash is perceived as having helped the moderate right come to power by then, perhaps a new government could look more favorably on the investigation and restore some of its old powers. Even though Mr. Moro may be far less popular than he thinks he is.

The independence of Operation Car Wash

It is perhaps best to conceive of Operation Car Wash as not just an anti-corruption investigation that overstepped its mark in the zealous prosecution of misdeeds, but rather as a political faction in its own right, competing against others in Brazil. It has its own support base and allied social movements; it has established alliances — most notably with the U.S. Department of Justice — and it has even sought to secure its own source of funds by way of a private anti-corruption foundation with resources recovered from the Petrobras graft scheme.

While it was at the peak of its powers, it operated as an entity independent of the Federal Prosecution Service, despite technically being subjugated to it. Now, in retrospect, one has to ask how Operation Car Wash managed to gain enough power to bring down governments, while committing multiple abuses of its own mandate? In other words: who was watching the watchmen?

With an authoritarian president in office, set on dismantling the separation of powers and intervening in order to shield his family from investigation, Brazil’s anti-corruption crusade does not seem to have actually resulted in the weakening of political corruption. This seems particularly evident in the fact that Mr. Bolsonaro has gambled his political future on paying off corrupt ideology-free political parties that dominate Congress in return for support. All of this seems to amount to struggles amongst the political class, while a pandemic that has killed over 95,000 ravages the country.[/restricted]


In the 5G era, 4G still dominates in Latin America

Postponed until H1 2021, Brazil’s 5G auction — tipped to be the largest in the world — will be decisive for the provision of the technology across Latin America. However, according to data from GSMA Intelligence, even with the experimental launch of the 5G network by some commercial carriers and several trials throughout the region, it is 4G technology that is set to pave the way for connectivity in Latin America for the coming years.

“We expect 4G to be the dominant technology for many years, coexisting with the growing number of 5G connections,” estimates Alejandro Adamowicz, director of Technology and Strategic Engagement for Latin America at GSMA. [restricted]“By 2025, the share of 4G will rise to 67 percent of total connections, driven by the growing number of smartphones — the adoption of which will rise from 69 to 79 percent between 2019 and 2025.”

According to the expert, Latin America is one of the top regions in terms of traffic growth, boosted largely by video and social networking applications. “The mobile network traffic is growing at an average of 50 percent per year, and in some countries it is doubling every 12 months,” he adds.

With GSMA estimating that USD 90 billion will be injected into the region’s GDP in 10 years through productivity gains, new products and services, and technology-based exports, the 5G network promises to update the Latin American digital landscape. The technology promises to provide increased internet speeds for end users, and increase adoption by business and government sectors, developing what are called “vertical applications” such as Digital Manufacturing, Oil & Gas, Smart Grid, Mining, Health, Transport, and Smart Cities. 

“The real innovative and transformational impact of 5G on the lives of end users will come from a variety of applications that 5G will unlock and that will be delivered through a B2B2C business model: operators selling services to companies that will transform them into tangible benefits for the people.” 

Looking forward to 5G auction day

In Brazil, though the auction of 5G frequencies has yet to take place, the country’s leading telecom carriers have already announced their plans for commercial networks involving the new technology. The idea is to use dynamic spectrum sharing (DSS), which would allow 5G connections on frequency bands that are already used by 4G, 3G, and 2G networks, eliminating the need to increase the spectrum. 

TIM Brazil — a Brazilian subsidiary of Telecom Italia — postponed its launch until this month, despite having announced the new service for three cities in September. Competitor Oi, on the other hand, launched its first 5G mobile internet commercial operation in capital city Brasília last week. Claro and Vivo began activating the technology in São Paulo, Rio de Janeiro, and other state capitals back in July. 

In addition to the carriers, tech behemoth Apple also intends to surf the wave of consumer excitement around 5G. Announced on Tuesday, all models of the new iPhone 12 in the U.S. will — according to the company — support millimeter-wave 5G, the fastest variant of the technology, as well as lower-frequency bands.

Outside the country, however, the new devices will not be compatible with millimeter waves. In Brazil, as well as in other countries, iPhone 12 models will only support lower-frequency versions of 5G.

After successive postponements, the 5G auction still has no defined rules and it will be up to President Jair Bolsonaro to give the final say on whether or not Chinese giant Huawei will participate in the process

Mr. Bolsonaro is reportedly considering banning the Chinese firm from providing components for the future network in Brazil, as he “sees China as a global threat to data privacy,” according to a senior government official anonymously quoted by Bloomberg.

This article on remote work was originally published on LABS – Latin America Business Stories, a news platform covering business, technology, and society in the region for an English-speaking audience.



Tech Roundup: Telecom regulator to incorporate postal services

You’re reading The Brazilian Report’s weekly tech roundup, a digest of the most important news on technology and innovation in Brazil. This week’s topics: the revamp of the Brazilian Telecom watchdog, Google trends for 2020 Black Friday, and the costs to mitigate interference with satellite TV ahead of the crucial 5G auction. 

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Telecom regulator set for name change, incorporating postal services

The recently recreated Communications Ministry presented its first big change this week: [restricted]rebranding the National Telecommunications Agency (Anatel) as the National Communications Agency (Anacom), which would be responsible for supervising both telecoms providers and the national postal service. 

Why it matters. The move has been framed as key in speeding up the privatization of Correios, the federally-owned postal company. The move has been planned since the Michel Temer administration and was included in President Jair Bolsonaro’s privatization plan. The cash-strapped government hopes to raise BRL 15 billion (USD 2.7 billion) from its sale.

  • However, the project never actually took off, due in part to intense backlash from civil servants.

Why the change? Communications Minister Fábio Faria said the proposal is “more about principles than rules,” as Congress will be responsible for defining Anacom’s role, as well as for deciding on the privatization of Correios.

  • If it moves forward, the bill would alter Brazil’s General Telecom Law, which deals with Anatel’s powers and responsibilities.
  • Mr. Faria added that the Brazilian Development Bank (BNDES) has hired consultancy firm Accenture to carry out studies on the privatization of Correios. Its findings shall be available within four months.

Benchmark. The structure of the new agency would be similar to Portugal’s Anacom, a communications watchdog that also handles postal services. The Portuguese institution had already been cited as a positive benchmark by Anatel chairman Leonardo Euler de Moraes.

Timetable. As the proposal has yet to be analyzed by the president’s Chief of Staff — before being put to Congress — there is no concrete expectation on when the change would be carried out.   

Pandemic trends to boost Brazil’s Black Friday

Black Friday has already established itself as one of the main retail events in Brazil. According to Google, things will get even bigger in 2020, as consumers transition to making their purchases online — a process fueled by the pandemic. Google searches for deals have already surpassed 2019 figures, weeks before the event on November 27.

  • Searches for some segments obliterated records to the point that normal search parameters have been altered. Current searches for “decor,” for example, are 51 percent above previous highs. “Food” and “drinks” — which are not the most sought-after products during Black Friday — saw jumps of 40 percent and 23 percent, respectively.

Looking for deals. Searches for sales grew 38 percent between April and July against the same period in 2019, reversing a trend seen in Q1. Google says the data shows Brazilians consumers have become more price-sensitive after the pandemic.

Cashback and coupons. Another major feature for consumers is the possibility of getting discounts or cashback on their online purchases. Searches for coupons are 35 times more frequent than cashback searches, but the interest for terms related to cashback is growing by 74 percent yearly — twice the rate of the interest for coupons.

Free shipping. In July, searches for free shipping were 118 percent higher than what was seen for last year’s Black Friday. Other postage solutions, such as express shipping and click-and-collect, are likely to become more relevant in the pandemic scenario. 

Why it matters. E-commerce has been retail’s silver lining during the pandemic, as the population’s consumer habits have become more digital while brick-and-mortar stores face restrictions. Other major selling events, Children’s Day and Father’s Day underperformed by 8.8 percent and 10.6 percent, respectively, which makes the retail season kickstarted by Black Friday even more crucial to the sector. 

Migrating satellite TV signal to reduce 5G interference is too costly, say companies

The possibility of interference with satellite TV dishes has been among the main roadblocks for Brazil’s impending auction of 5G frequencies. However, while Anatel has yet to reach a consensus on the matter, telecom companies are already presenting their own solutions. 

  • In a new study, Conexis Brasil Digital — an association gathering the main telecom providers and industry players in Brazil — found evidence to support the use of LNBF filters to mitigate 5G interference on satellite TV signals, at a cost of BRL 224 million (USD 40 million) for companies. Anatel, meanwhile, has demonstrated its support for migrating satellite signals to the Ku frequency band, a process which could be up to eight times more expensive. 

Understanding the issue. Using the 3.5 GHz frequency band for 5G runs the risk of causing interference with the reception of satellite antennas, affecting some 1.37 million homes in Brazil, according to Conexis. The problem is similar to the interference of 4G interference with analog TV signals, solved by installing devices on analog TVs, paid for by companies.

  • Earlier this year, the Science and Technology Ministry ordered Anatel to carry out studies to find out the best way to mitigate the interference, but tests were delayed amid the pandemic. 
  • Among the options, there is the adoption of filters or the migration of signals from the C band to the Ku band. The agency’s president, Leonardo Euler de Moraes, said in August that tests were still ongoing, but they were leaning toward migration. 

Costs. Conexis says that migrating signals would affect over 4.8 million homes — far more than those who may experience interference — and cost as much as BRL 1.8 billion. The association says that if the companies awarded 5G contracts are forced to pay for this, it would “harm the quick expansion and massification of the new technology.”

Take note

  • Phone loans. Telecom provider Vivo will launch a new credit service, VivoMoney. Customers of monthly phone plans may take out loans of up to BRL 30,000, with interest of 1.99 percent per month. The service will be fully digital and is Vivo’s latest attempt to become a digital hub beyond telecom services. 
  • System crash. Services of digital bank Nubank experienced instability on October 15, and many users reported glitches on the platform on social media. We at The Brazilian Report noticed instabilities on the bank’s Nuconta current account platform, but credit card services appeared to be working normal. In a statement to newspaper O Estado de S.Paulo, Nubank said the disruption was related to their internal services but provided no further detail.  
  • Partnerships. French ride-hailing app Blablacar will begin selling bus tickets in Brazil, after seeing usage drop by up to 60 percent in April. The app has partnered with 40 bus companies to offer tickets on its marketplace and hopes to reach 100 partnerships by 2021.  
  • Climate change. Brazil and the United Kingdom signed a cooperation agreement on sharing climate data and preventing natural disasters. The project Climate Science for Service Partnership Brazil (CSSP) will be carried out by three leading research institutes in Brazil (INPE, INPA, and Cemaden), alongside the UK Met Office. The project will have three main areas: carbon cycle modeling to inform mitigation policy, development of climate models, and climate impact and disaster risk reduction. The UK will provide GBP 4 million (USD 5.17 million) in funding, while each Brazilian institute will redirect funds of their budgets to the initiative, and the Science and Technology Ministry will contribute an additional BRL 500,000 (USD 89,000).
  • PIX. The Brazilian Central bank informed that over 33 million PIX “keys” have been registered in Brazil. Digital bank Nubank leads the way with roughly 8 million keys, followed by Mercado Pago — Mercado Livre’s digital wallet service — with 4.7 million keys. However, a report by website 6Minutos shows that users are accusing both services of registering keys without their consent, a practice they deny. The issue may also have been caused by scammers, as at least 60 fraudulent websites were found to be targeting PIX on the first days of registration. 
  • Marketplace. Digital bank Banco Inter opened up its marketplace platform to people that are not currently bank customers. New clients will have access to 100 stores registered on the platform and benefits such as cashback.[/restricted]

Brazil’s Communications Minister tests positive for Covid-19

Fábio Faria, Brazil’s Communications Minister, announced on Twitter that he has contracted the coronavirus. He mentioned having a fever and headache — but says he is “practically asymptomatic” as of now, and will continue to work remotely. He is the 11th Brazilian cabinet member to test positive for Covid-19.

On Twitter, he suggested that he may have caught the virus “at a dinner party after which many participants became ill.” He was talking about last week’s meeting between House Speaker Rodrigo Maia and Economy Minister Paulo Guedes, in which the two tried to bury the hatchet over past disagreements and work together for economic reforms.

Like many of President Bolsonaro’s underlings, Mr. Faria said he would treat himself with hydroxychloroquine — an antimalarial drug with no proven effect against Covid-19, but touted by the president as a “possible cure.”

A congressman, Mr. Faria joined the administration in June after President Jair Bolsonaro promoted a cabinet reshuffle — re-creating the Communications Ministry. In just a few months, however, he has become one of the president’s most influential advisors, helping reshape Mr. Bolsonaro’s typically confrontational demeanor. 

Since Mr. Faria took office, the president has abandoned his constant attacks against Congress and the Supreme Court and has instead tried to build bridges with the other branches of government. That shift has been pivotal in the government’s efforts to diffuse investigations against the First Family — especially the involvement of the president’s eldest son with money-laundering schemes, and his two other political sons’ involvement with illegal fake news-spreading networks.

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Brazil Daily

Brazil’s controversial foreign minister to face chop if Biden wins

Today, how a Biden win in the U.S. could cost Brazil’s Foreign Minister his job.. The plans to vaccinate Brazilians against Covid-19 in January. And what you need to know about Brazil’s municipal races.

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Biden win could lead to cabinet reshuffle in Brazil

The U.S. presidential election will take place in 18 days — but more than 15 million Americans have already voted early. [restricted]And the odds suggest that former Vice President Joe Biden will unseat Donald Trump (per FiveThirtyEight’s model, Mr. Biden has an 87-percent chance to win the electoral college). And while a Biden win shouldn’t substantially alter the nature of Brazil-U.S.’ never-too-hot-never-too-cold relations, it could lead to changes in the Jair Bolsonaro cabinet.

  • According to Brasília correspondent Débora Álvares, the Brazilian president’s newfound allies — a group of ideology-free parties known as the “Big Center” — want to use the U.S. election as a pretext to bin Foreign Minister Ernesto Araújo, which they have reportedly been looking forward to for some time.
  • Mr. Araújo is known for his anti-globalist, Sinophobic views. He also wrote once that Donald Trump is the West’s hope for salvation against “Stalin’s or Mao’s or Pol Pot’s henchmen.” He has become a nuisance for the Brazilian political establishment, in particular those defending the interests of agribusiness — who see China as their best client, not an existential threat.
  • His latest controversy involved hosting U.S. Secretary of State Mike Pompeo on a visit to the Venezuelan border, just weeks before the U.S. election. The Foreign Minister was accused of jeopardizing future relations with a potential future Biden administration

Scapegoat. Mr. Araújo is accused by career diplomats of undermining centuries of diplomatic tradition in less than two years. But while he has become a lightning rod for criticism, the minister is following the tone set by the president himself — who has made countless displays of sycophancy towards Donald Trump and hostility towards China.

Why it matters. Ernesto Araújo is arguably the cabinet member who is the most loyal to the Bolsonaro family — and champions the president’s positions unapologetically.

  • Getting rid of Mr. Araújo would be yet another example of Mr. Bolsonaro breaking with Bolsonarism — in a movement towards moderation (at least in tone) to ensure stability to the administration. Those are calculated moves by a president who has proved to be much savvier than given credit for: while remaining firmly on the right wing, he is attempting to gain ground among less radical supporters, while knowing he remains the best (perhaps only) option for hardcore far-right voters.

You should listen: Explaining Brazil #117: Biden or Trump, what changes for Brazil?

Government announces Covid-19 vaccine plan for January

The Brazilian Health Ministry presented its 2021 National Immunizations Program on Thursday, which forecasts distributing a coronavirus vaccine as early as January 2021. The first phase of the plan is to make 15 million doses available, to be used on 7 percent of the population.

  • While four potential vaccines are being tested in Brazil, only one — being developed by the University of Oxford and British-Swedish pharmaceutical company AstraZeneca — made it onto the national vaccine calendar. The government believes trials of that vaccine will be complete by November.
  • The ministry’s decision not to include the potential vaccine being developed by Chinese company Sinovac Biotech in partnership with the São Paulo state government came across as puzzling. A council of state health officials asked, in a letter, for the government to reconsider.

Why it matters. The Health Ministry’s move reignites fears that President Jair Bolsonaro will turn the coronavirus vaccine into a new political war — as he aims to score points on São Paulo Governor João Doria, one of his fiercest political rivals.

Anti-vaxxer? Polls show Brazilians are eager to get a vaccine — and many want immunization to be mandatory. However, Mr. Bolsonaro has leaned in the opposite direction, even voicing some arguments used by anti-vaxxer movements, such as individual freedoms. In August, he said “nobody can force anybody to take a vaccine.” 

  • Moreover, experts fear the president’s supporters could become overly skeptical of what they call “the Chinese vaccine” and refuse immunization. A new poll conducted by Brazilian and Canadian universities show that only 54 percent of government supporters want to take a vaccine — versus 79 percent among detractors.

Election 2020 snapshot

Brazil’s municipal elections will take place in exactly 30 days’ time. This is what you need to know:

  • Ads. This week marked the beginning of political ads on television and radio — which, with millions of people still staying home, gained renewed importance in 2020. Candidates have the right to free airtime, but it is distributed between all political parties, in proportion with the number of seats the party holds in their respective state legislatures.
  • São Paulo. Incumbent Bruno Covas — who leads a six-party coalition — monopolizes 40 percent of airtime in São Paulo, and it has worked to his advantage. The latest poll showed him virtually tied with the frontrunner, Congressman Celso Russomano (22 and 25 percent of votes, respectively). More importantly, Mr. Covas lowered his rejection rates by 8 points — to 23 percent.
  • Leftist debacle. The Workers’ Party has won the race for São Paulo City Hall three times since Brazil’s return to democracy — no small feat, given the city’s more conservative leaning. However, the party continues its downfall, which started in 2016. Candidate Jilmar Tatto, a Lula loyalist, is unknown to most voters and polls at just 1 percent. Many in the party’s top brass have said he should drop out and endorse far-left candidate Guilherme Boulos, who is polling third with 10 percent.
  • Xenophobia as a platform. Two mayoral candidates in the Roraima state capital of Boa Vista, in Brazil’s North, are facing charges of inciting racism. Federal prosecutors acted after the candidates made discrimination against Venezuelan migrants the cornerstone of their campaigns. One used the slogan: “Venezuelans will not have privileges,” while the other promises to “limit Venezuelans’ access to healthcare and education.” Roraima has received an inflow of Venezuelan migrants in recent years, as they flee their country’s full-scale socioeconomic collapse.

What else you need to know today

  • Cabinet. Communications Minister Fábio Faria has tested positive for Covid-19, but has only shown mild symptoms and will continue to work remotely. Mr. Faria took office in June following a cabinet reshuffle, and has quickly become one of the president’s most influential advisors, helping to tame his demeanor and abandon the constant attacks against Congress and the Supreme Court.
  • Bounceback. The São Paulo state government is set to announce its economic recovery plan today, expected to rely heavily on privatizations — something Governor João Doria supported long before the pandemic. Another pillar of the plan will be an austerity package approved by the state legislature, which cuts back on tax breaks and creates a voluntary redundancy program to axe 5,000 civil servant positions.  
  • Top 5 worldwide. After confirming over 15,000 new coronavirus infections and 350 deaths, Argentina became the country with the fifth-highest number of cases in the world, while its death tally is 12th-largest. Argentina was one of the first Latin American countries to respond to the coronavirus pandemic, with the government placing the country under lockdown by March 20 — even before European countries such as Germany. Massive inequality and the prevalence of informal labor, however, made it impossible to fully enforce restrictive measures. 
  • Butt-gate. Senator Chico Rodrigues — caught stashing BRL 30,000 “between his buttocks,” according to the Federal Police — was relieved from his duties as the government’s deputy whip. Moreover, the Supreme Court ordered his 90-day suspension from the Senate, a decision that must be approved by his peers before being enforced. But Mr. Rodrigues seems to be safe from impeachment, at least for now, as the Senate’s Ethics Committee (of which the senator is a member, ironically) is not currently holding in-person sittings.
  • Spread. Only eight of Brazil’s 5,570 municipalities have not recorded a single Covid-19 case — and none of them have more than 7,000 inhabitants. So far, Brazil has registered 5.17 million infections and 152,460 deaths. There are at least 93 potential cases of reinfection being analyzed in the country.[/restricted]
Latin America

Brazil-Paraguay border reopens after seven months

Connecting the Brazilian city of Foz do Iguaçu to Paraguay’s bargain shopping paradise Ciudad del Este, the Friendship Bridge is one of the most-used bridges in South America — and the busiest of Brazil’s border crossings. Before the pandemic hit, some 100,000 pedestrians and 40,000 vehicles would cross on an average day.

A notable free-trade zone, Ciudad del Este welcomes droves of Brazilian tourists looking for tax-free goods such as perfumes, electronics, and clothing. Thousands of informal salespeople also join the throngs of shoppers, in search of cheap products they can resell in Brazil for higher prices.

But that bustling tradition of commerce ground to a halt in March, when Paraguay closed its borders to protect itself from imported coronavirus cases, blocking off the Friendship Bridge in the process. [restricted]At the time, Asunción called Brazil’s Covid-19 response “chaotic,” and Guillermo Sequera, head of the Paraguayan Health Surveillance Board, said the border would remain closed “until the wave in Brazil was over.”

Indeed, closing the border made sense, as 40 percent of all cases in Paraguay were recorded in Ciudad del Este.

Now, the Friendship Bridge is open for the first time in seven months, with Brazil showing progressively lower daily Covid-19 death numbers. For the time being, only private vehicles and cargo trucks will be able to cross between the two countries, and only between 5 am and 2 pm. On November 1, pedestrians will be allowed to use the bridge once again.

Reopening the Brazil-Paraguay border

Bridge Paraguay Brazil border
Federal Road Patrol car blocks Friendship Bridge. Photo: Arquivo/PRF

Closing the border came as a hefty blow to the Ciudad del Este economy. Revenue from commerce in the city dropped from around USD 400 million per month to just 5 percent of that. Sixty-four thousand people were left unemployed, accounting for almost half of the city’s population of working age.

“The bulk of sales depends on people coming over from Brazil,” said Juan Vicente Ramirez, chairman of the local chamber of commerce. “For many store owners, there was no point in opening just for local shoppers — and about 80 percent of them remained closed for the past few months.”

Strained by their economic needs, local business owners launched an intense campaign to reopen the border — a struggle that culminated in violent protests in July.

After falling out over Covid-19, Brazil and Paraguay have begun to mend fences, signing a bilateral agreement to allow the partial resumption of commerce. 

Six trade centers in border towns were created — where citizens can go to buy goods from the neighboring country.

In a second stage, which has yet no date to be enforced, other border crossing points will be reopened. That is the case for the border between Pedro Juan Caballero (Paraguay) and Ponta Porã (Brazil), two cities 400 kilometers north of the Friendship Bridge, and separated by nothing more than a street.

In preparation for the reopening, the city of Foz do Iguaçu has requested federal funds to expand its healthcare network — increasing its number of intensive care units in anticipation of Paraguayan patients flocking to hospitals on the Brazilian side of the border.

Drug smuggling boomed despite closed borders

Paraguay is a massive gateway for drugs coming into Brazil, in what is called the “hillbilly route” of South American narcotics trafficking. Drugs from Bolivia and Peru pour into the Brazilian state of Mato Grosso do Sul, via Paraguay, before being transported to the Port of Santos — and shipped to Europe.

In recent years, Brazil has invested big bucks to secure its border with Paraguay. The country is implementing the first phase of the Integrated Border Monitoring System (Sisfron) — a sophisticated surveillance network to patrol a stretch of 650 kilometers of the border.

But not even the increased surveillance — coupled with Covid-19 border closures — has slowed down drug smugglers, who seem to be busier than ever. Between January and August, the Federal Highway Police apprehended almost 45 tons of cocaine, 136,000 amphetamine pills, and over 1 million cannabis plants — enough to fill the equivalent of 28 football pitches.

The numbers give the impression that the drug problem is a bottomless pit. In trying to deal with the issue, Paraguayan lawmakers are taking steps to change the laws on legal cultivation of cannabis — going in the direction of Uruguay, where recreational marijuana is legal.

But the conservative Brazilian Congress resists even entertaining discussions on medicinal cannabis — let alone debating relaxed rules on recreational drugs.[/restricted]


Giving “dirty money” a new meaning

On Wednesday, Senator Chico Rodrigues, the government’s deputy whip in the Senate, was targeted by a Federal Police investigation into the embezzlement of BRL 15 million earmarked for the fight against Covid-19 by members of Congress. However, while this story seems bad enough, as Brazilians say: the hole gets even deeper. The Feds found around BRL 30,000 in cash in the senator’s home, with part of the money soiled by being stashed “between his buttocks,” leaving little to the imagination.

Interestingly, the case surfaces just days after President Bolsonaro stated that there was no more corruption in the government. Furthermore, last week, Mr. Bolsonaro said that if someone steps out of line with regard to corruption, they will be met with “a flying kick to the neck.”

The case continues to shed light on how corrupt officials are using the emergency situation created by Covid-19 to fill their pockets — and underwear, apparently — with public money. 

In a video that resurfaced after yesterday’s events, Bolsonaro is seen praising Senator Chico Rodrigues, saying their relationship is “almost a stable union.” However, today, Mr. Bolsonaro affirmed that Rodrigues is not part of his administration, despite being his deputy whip in the Senate.

Could this be a new meaning for the term “dirty money”?

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Bolsonaro’s rejection rates drop, but Brazilians demand more emergency aid

The rejection rate of the Jair Bolsonaro administration fell by 5 percentage points in October — to 31 percent, the lowest level since May 2019 — according to a new XP/Ipespe poll. The share of the population that evaluates the administration as “good/great” remained at 39 percent. Still, this is the second-highest approval rating of the government since February 2019, one month into President Bolsonaro’s term. 

The improvement in the administration’s popularity levels came off the back of improved prospects in a series of indicators: 40 percent of voters perceive news concerning the government as “negative,” down from 63 percent in May. 

Also, less Brazilians believe corruption will increase over the coming months, dropping five percentage points to 40 percent. However, this came before Wednesday’s scandal involving Senator Chico Rodrigues, the government’s deputy whip in the Senate, who was found hiding money embezzled from Covid-19 efforts “between his buttocks”.

Another key reason behind the president’s lower rejection rates — the coronavirus emergency aid program — is broadly supported by the population. As of October, 42 percent of interviewees had received the stipend, while 45 percent considered it was a good decision to extend payments until the end of the year. More importantly, 68 percent of Brazilians believe that if the new cash transfer program Renda Cidadã is not approved, the government should extend the emergency aid into 2021.

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Explaining Brazil #129: Bolsonaro steering away from Bolsonarism

President Jair Bolsonaro has pretty much broken with everything he stood for in the 2018 election. He has not catered to Evangelicals in Congress; he has declared the end of Operation Car Wash; and his family is battling multiple corruption accusations. But Mr. Bolsonaro has never been stronger among politicians in Brasília — nor has he been more popular with voters.

Still, it is possible to see cracks in the Bolsonarism bloc, with some far-right activists calling for protests against the president — who they call a “closeted left-winger,” something the president — and anyone on the left — would strongly deny.

This week, we discuss the political repercussions of the president’s political shift.

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On this episode:

  • Pablo Ortellado is a philosopher, researcher, and public policy professor at the University of São Paulo. His research interests include copyright policies, access to information, cultural policies, and social movements.

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Brazil trade with U.S. sees worst result in 11 years

The most notable change in Brazilian foreign policy since the election of President Jair Bolsonaro in 2018 has been the country’s full alignment with the U.S. However, this shift in allegiances has yet to result in any concrete gains for Brazil — in fact, bilateral trade with the U.S. has just seen its worst result in 11 years. Between January and September of this year, accumulated trade between the two countries hit USD 33.4 billion, a 25 percent drop from the same period in 2019. 

Regardless, the U.S. remains Brazil’s second-largest trading partner, accounting for 9.7 percent of Brazilian exports and 12.3 percent of revenue. Only China detains a larger slice, buying up over one-third of Brazil’s exports.[restricted]

According to data from the American Chamber of Commerce in Brazil (AmCham Brasil), 2020 is shaping up to end with a Brazil-U.S. trade deficit of between USD 2.4 and 2.8 billion — the worst result in five or six years. The findings are presented in AmCham Brasil’s latest Brazil-U.S. Trade Monitor, published this week.

Sluggish trade: pandemic to blame?

The AmCham Brasil report singles out three leading factors to explain the sharp downturn in bilateral trade. “The combination of the severe effects of the economic crisis caused by the [Covid-19] pandemic, the fall in global oil prices, and trade restrictions in specific sectors – such as the steel industry, account for a large part of the contraction in bilateral trade,” explained AmCham Brasil’s executive vice president, Abrão Neto.

Mr. Neto went on to say that the delayed effect of the pandemic on imports was due to the customs clearance of orders made and shipped before the crisis continuing to be carried out in the early stages of the pandemic. Furthermore, a large part of Brazil’s trade with the U.S. is made up of intra-company exchanges, which may have taken some time to reflect the drop in demand.

“It was a severe blow for bilateral commerce, but our assessment is that the worst is behind us,” said Mr. Neto. AmCham Brasil is confident in the recovery of international goods and services trade, and of the demand this will bring to Brazilian and U.S. exporters.

Amid the unforeseen Covid-19 crisis, another factor set to reclaim importance is the trade war between the U.S. and China. “This will continue for some time and the entire world is factoring it into the equation as a variable,” said Mr. Neto. However, it is stressed that tensions between the two countries are unlikely to be specifically crucial in Brazil-U.S. relations, but it will have an effect on global trade as a whole.

In September of last year, the International Monetary Fund (FMI) predicted growth of just 0.8 percent for the global economy in 2020, as a result of the China-U.S. trade war. This, of course, was before the Covid-19 pandemic came to decimate all forecasts for this year.

Difference between the U.S. and China

Brazil’s export portfolio to the U.S. — with 87.2 percent comprising products with higher added value — goes some way to explaining the fall in trade seen in 2020. For instance, the trend is drastically different in Brazil-China trade, which saw an uptick due to agricultural commodities.

The one commodity that did have an influence on Brazil’s trade balance with the U.S. was oil, prices of which have yet to return to pre-pandemic levels after collapsing in March. In total, oil and fuel make up for 8.9 percent of all Brazilian exports to the U.S.[/restricted]


Central Bank “GDP preview” slows down in August

The Brazilian Central Bank’s IBC-Br index — seen as a preview of the country’s GDP — rose by 1.06 percent in August, below market forecasts of a 1.7-percent spike and July’s 2.15-percent growth. Still, it is the fourth consecutive month of recovery. 

Since January, the IBC-Br has fallen 3.92 percent, while markets’ consensus expected a 4.10-percent plunge. On a year-to-date basis, the index is down 5.44 percent, worse than the 4.7-percent drop in economic activity expected by the Economy Ministry.

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Brazil Daily

Moody’s threatens to downgrade Brazil

Today, we talk about how Jair Bolsonaro struggles to fit social policies within the federal budget — and Brazil could have its debt rating downgraded. Meat kings JBS add to their list of scandals. Bolsonaro ally caught short during Federal Police corruption operation.

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Bolsonaro torn between fiscal cap and need for social policies

Samar Maziad, a vice president and senior analyst for Brazil at ratings agency Moody’s, [restricted]said on Wednesday that Brazil’s sovereign debt could be downgraded further into junk territory unless the government managed to advance its agenda of reforms this year or, at the latest, early in 2021. “If the support for reforms dwindle, it will have a negative impact on our outlook [for the country],” said Ms. Maziad during an event.

  • Moody’s currently gives Brazil a Ba2 rating, two tiers below investment grade, with a “stable” outlook.

Why it matters. The path of austerity is by no means an obvious choice. With record-high unemployment rates and an uncertain recovery from the pandemic crisis — which no one knows how long will last — the government has been faced with the challenge of creating a new cash-transfer program that is bigger than Bolsa Família.

  • There is also the political element: the coronavirus emergency salary has pushed President Jair Bolsonaro’s approval ratings to their highest levels since his inauguration. Data published just hours ago by pollster PoderData shows the government’s approval ratings at 52 percent. 
  • “If Mr. Bolsonaro is able to combine his socially conservative agenda with a broad social protection network, his re-election bid shall become unbeatable in 2022,” said Pablo Ortellado, a public policy professor at the University of São Paulo, speaking to The Brazilian Report.

What is the plan? It is hard to know what the government has in store for taming the debt and preventing millions of people from dropping below the poverty line once the coronavirus aid ends in December. The latest plan being discussed within the Economy Minister would reduce the number of families benefited by the federal cash-transfer program to around 20 million. But with a divided cabinet, the administration has struggled to settle on a single plan.

  • Interestingly, it’s not only the federal government that is discussing cash transfers. In São Paulo, the two leading mayoral candidates — incumbent Bruno Covas and the Bolsonaro-backed Congressman Celso Russomano — have proposed emergency aid or basic income programs for São Paulo residents. 

State of the debt. According to the latest forecasts by the International Monetary Fund, Brazil’s debt-to-GDP ratio could top the 100-percent mark this year. Among emerging economies, only Angola would have a bigger deficit. The IMF also believes that Brazil is unlikely to record a primary surplus before 2025.

Bright-ish spot. The services sector — the backbone of the Brazilian economy — grew 2.9 percent in August when compared to July, recording a third consecutive month of growth. Even bars and restaurants are performing better than expected, with revenue at around 60 percent of pre-pandemic levels.

Meat kingpins under fire

On Wednesday, federal prosecutors indicted Mato Grosso do Sul Governor Reinaldo Azambuja and businessmen Joesley and Wesley Batista for corruption, money laundering, and criminal association. The Batista brothers — who control the world’s largest meatpacking company, JBS — are accused of paying BRL 67 million (USD 12 million) in kickbacks to the governor and his allies, in exchange for not paying state-level taxes. JBS allegedly gained BRL 209 million with the scheme.

  • On the same day, the Pilgrim’s Pride Corporation — a U.S.-based subsidiary of JBS — agreed to pay USD 110.5 million to settle federal charges that it fixed chicken prices for years, passing on higher costs to consumers, restaurants, and supermarkets.
  • Also on Wednesday, JBS’ parent company, holding firm J&F, pleaded guilty to U.S. foreign bribery charges, agreeing to pay USD 128 million in fines. The settlement refers to the company’s role in corruption scandals that nearly brought down the Michel Temer administration in 2017.

Rap sheet. Top executives of the J&F group admitted having bribed more than 1,900 politicians to advance their business interests — particularly regarding the expansion of JBS from a regional player to an international behemoth.

Stocks, stakes … Shares of JBS closed the day up 9.2 percent, following the news of the settlements — which investors hope will help turn a new leaf on JBS’ laundry list of scandals. The indictment, however, became known after market hours. 

A new meaning for the term “dirty money”

Just days after President Jair Bolsonaro stated that he had ended Operation Car Wash due to there being “no more corruption within the government,” his administration was rattled by an awkward — and frankly disgusting — scandal. Senator Chico Rodrigues of Roraima, the government’s deputy whip in the Senate, was targeted by a Federal Police investigation into the embezzlement of BRL 15 million earmarked for the fight against Covid-19 by members of Congress.

  • The Feds found around BRL 30,000 in cash in the senator’s home, with part of the money being stashed — we kid you not — “between his buttocks,” as reported by online magazine Crusoé, and confirmed by newspaper Folha de S.Paulo. As many of our subscribers read this newsletter during breakfast, we will spare you the gory details.
corruption federal police
Illustration by Jika

Why it matters. Few times have Brazilians been faced with such a ridiculous and graphic scandal — which can certainly do no good for the government’s image, especially as Jair Bolsonaro clashes with his core supporters, who oppose his pandering to establishment politicians.

  • The case also continues to shed light on how corrupt officials are using the emergency situation created by Covid-19 to fill their pockets — and underwear, apparently — with public money.

What they are saying. “I am relaxed about what happened in my home. I trust the justice system and know I will be able to prove my innocence,” said Mr. Rodrigues, in a statement.

  • “Ah, Car Wash is over, folks? The Feds are in Roraima today,” said Mr. Bolsonaro, on Twitter.
  • “Money laundering will be key in this case,” joked Federal Prosecutor Vladimir Aras, brother of Prosecutor General Augusto Aras.

Off you go. Government officials agree that either Mr. Rodrigues resigns as deputy whip, or he will be demoted.

What else you need to know today

  • Deceleration. The Central Bank publishes the latest update to its Economic Activity Index (IBC-Br) today, considered to be a predictor of the official GDP rate. Analysts expect the index to show a 1.6-percent expansion of the Brazilian economy in August — which would mean a deceleration of the economic rebound after months of stricter social distancing. In June, the index was at +5.32 percent, and reached +2.15 percent in July.
  • Crisis. Ricardo Eletro, one of Brazil’s biggest retail groups, has filed for bankruptcy protection. In what will be the biggest court-supervised recovery plan in Brazilian history, the group is set to split its assets into multiple companies in order to divest and be able to pay its BRL 4-billion debt to 20,000 creditors. 
  • Environment. A federal court denied a request to suspend Environment Minister Ricardo Salles from office. In their lawsuit, federal prosecutors say Mr. Salles is deliberately depleting Brazil’s environmental controls — which could allow Amazon deforestation to reach a point of no return (after which the rainforest could, according to scientists, become a savannah-like biome) and bring “tragic effects on environmental protection frameworks.” A panel of judges will trial the case on October 27.
  • Supreme Court. Allegations of plagiarism might have tarnished Federal Judge Kássio Nunes Marques’ academic résumé, but they have not dented his chances to be confirmed as Brazil’s next Supreme Court justice. Senator Eduardo Braga, the rapporteur of his confirmation proceedings, has recommended that the Senate’s Constitution and Justice Committee approves the nomination, saying the inconsistencies on Mr. Nunes Marques’ CV do not qualify as “relevant facts” against the judge.
  • This time’s the charm? The government intends on presenting its plan to privatize Correios — the state-owned postal company — “at the beginning of next year,” according to the Communications Ministry. Privatizing Correios has been listed as a priority since President Jair Bolsonaro took office in January 2019 — but no progress has been made since.
  • Drug boss. The Supreme Court is set to end a trial today on whether or not to jail a leader of the São Paulo-based First Command of the Capital (PCC), arguably Brazil’s most powerful criminal organization. He was set loose by Justice Marco Aurélio Mello last weekend due to a technicality — and a majority of justices (6 out of 6) have voted to overturn his decision. But the outcome of the trial should matter little: the drug boss, called André do Rap, is already at large.
  • Science. The Health Ministry has launched a BRL 600-million (USD 107-million) program to create a national database with mapped genomes of 100,000 Brazilians. The initiative could help anticipate disease diagnostics. [/restricted]

Peru scraps hydroxychloroquine, azithromycin from Covid-19 medication list

The Peruvian government has revoked the inclusion of hydroxychloroquine and azithromycin on the list of medications recommended to treat Covid-19, in the wake of studies that show neither drug is effective in combating the disease, while antiviral Remdesivir has shown positive results. 

When it first recommended the use of hydroxychloroquine and azithromycin back in April, Peru’s Health Ministry had already warned there was no robust evidence to support the efficiency of either drug, but allowed their use at the discretion of medical professionals.  

However, the decision to remove the medications from the list came soon after the director of the country’s health technology evaluation institute was fired following a study on the effectiveness of hydroxychloroquine in treating Covid-19. As Gestión newspaper reports, Peru’s Health Ministry is still evaluating the study, but it has already been criticized for a lack of scientific rigor. 

Hydroxychloroquine has been widely touted as a Covid-19 treatment by several world leaders, especially Brazil’s President Jair Bolsonaro, who claims to be living proof that the medicine works.

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Pandemic to worsen Brazil’s troubling school dropout rates

Over 38 billion dollars: that is the estimated cost of school dropouts in Brazil in the year 2020 alone. Researchers from business and economics school Insper, in conjunction with the Roberto Marinho Foundation, concluded that some 575,000 young Brazilians will end this year having not completed basic education — a number that exceeds the total population of some of the country’s state capitals. 

In their study, entitled “Consequences of the Violation of the Right to Education,” the researchers estimated a lifetime loss of BRL 372,000 (USD 66,700) per student, accounting for factors such as lower employment prospects, decreased wage expectations, losses due to a reduced contribution to economic activity, decreased quality of life, and a higher probability of being involved in crime.[restricted]

Furthermore, the study did not even account for the knock-on effects of the Covid-19 pandemic, meaning the number of dropouts and future losses could be even higher. 

Another study, carried out by the National Youth Council (Conjuve), found that 28 percent of students aged between 15 and 29 are considering not returning to school once pandemic-related restrictions are fully lifted. Half said they are unlikely to apply for next year’s National University Entrance Exam (Enem).

The Insper study assessed young people born in 2002 who would now be expected to complete high school education. According to their research, an average teenager who completes basic schooling should be expected to accumulate an income of BRL 427,600 throughout their lifetime — for those who do not complete high school, this average drops to just BRL 268,500.

Indeed, wealth was not the only factor assessed, with Insper researcher Laura Müller Machado pointing out that those who do not complete high school are expected to have a lower quality of life and poorer health conditions. Society as a whole also stands to lose.

“Young people who complete basic education tend to encourage more constructive environments wherever they go, they have a greater capacity to generate innovation, inspire, and transmit knowledge. Besides, young people who don’t finish basic education are more likely to be involved in episodes of violence, whether as victims or perpetrators, as they usually live in more vulnerable places and are more exposed to conflict. This has a considerable cost for society”, she explains.

School dropouts: a neglected population

According to the National Household Sample Survey (Pnad), carried out by the Brazilian Institute of Geography and Statistics (IBGE), 20.2 percent of the 50 million Brazilians aged between 14 and 29 have not finished a single stage of basic education. Among the reasons cited for this are disinterest in studying and a pressing need to leave school in order to work.

According to Roberto Rafael Dias da Silva, a Ph.D. in Education and professor at the School of Humanities at the University of Vale do Rio dos Sinos (Unisinos), the data reflects a lack of investment — both in Brazil and Latin America as a whole — in diagnostic research and proposing viable alternatives for keeping kids in school.

“Cultural issues, the need to enter the labor market prematurely, and changes in the economy, for example, can explain the high rates of school dropouts. Most of the time, dropping out of school is not a matter of choice”, he says, adding that education systems, publishers, professional associations, and educational institutions themselves need to create permanent study centers on child and teenage education in Brazil.

Mr. da Silva also asserts that the outlook demands action from the government, such as a collective re-examination of educational purposes, programs for monitoring learning, and long-term policies. Meanwhile, Ms. Machado suggests that the government should be examining the good educational practices being deployed in Brazil — as the issue of school dropouts is not universal around the country. 

Congresswoman Tabata Amaral, a leading voice in the public discourse on education, claims that Brazil’s Education Ministry has been “adrift” for almost two years. “What do we as a society expect from Education Ministers? That they would take their place as the coordinators of national educational efforts, as supporters of the most vulnerable education networks. But the Ministry decided to fold its arms instead. Of course, there are good examples from some states and municipalities, many inspiring teachers, but we know it takes more than that”, she says.

Civil society’s role in change

While it has become clear that the government holds significant responsibility in solving the problem of school dropouts in Brazil, that does not mean that civil society initiatives are not welcome. One example of a successful program is the NGO Instituto Futebol de Rua (Street Football Institute), which since 2006 has used sport, education, and culture as tools for social development in the southern city of Curitiba and other urban centers.

Jurema Christen, one of the organization’s teachers, says one of the goals of the initiative is to dissuade its young participants from leaving school,

“We believe in transformative, effective, and integral education. This is only possible if we have a strong partnership with the families and schools where our youths study. In such a delicate moment as the Covid-19 pandemic, we must take a closer look at our students. We are in constant communication with families, to encourage these young people to continue studying, even in remote settings”, she says.

The institute also developed a completely free program for monitoring studies. Each week, families enrolled in the initiative receive phone calls from the NGO’s education professionals to assist students with any issues they may be having with schoolwork. “Our goal is to reduce school dropouts as much as possible,” says Ms. Christen.[/restricted]


Brazil captured a notorious drug boss — then let him go

In September 2019, Brazilian police arrested 43-year-old André Oliveira Macedo — a drug kingpin best known as André do Rap — after being on the run for six years. As one of the top brass of the First Command of the Capital (PCC) — Brazil’s largest organized crime gang — André do Rap was hiding out in a luxury mansion in the Rio de Janeiro beach town of Angra dos Reis.

The investigation that led to his arrest was long and painstaking, involving the collaboration of law enforcement agents from Italy and the U.S., as a result of André do Rap’s involvement with transnational drug trafficking. When he was taken in, several of his luxury possessions were seized, including a helicopter, yacht, and a 4×4 Hyundai Tucson.

However, after just one year in custody, André do Rap was set free on a legal technicality. And before the Supreme Court could rectify this mistake, he was already at large, with authorities believing the drug boss has now fled the country.[restricted]

Slipped through their fingers

André do Rap was a key figure within the international expansion of the PCC and its consolidation as South America’s widest reaching drug cartel. His role was to oversee the trafficking of immense quantities of cocaine from the Port of Santos, in São Paulo state, over to Calabria in southwest Italy. From there, the product was picked up by the PCC’s notorious Italian allies ‘Ndrangheta and distributed Europe-wide. 

But despite a sentence of over 25 years in jail for international drug trafficking, André do Rap walked out of jail last Saturday, thanks to a court order by Supreme Court Justice Marco Aurélio Mello. His lawyers claimed that their client’s preventive detention had not been renewed within the legally stipulated time frame of 90 days — a new rule introduced by the so-called Anti-Crime Bill, ratified by President Jair Bolsonaro in January. Finding this to be true, Justice Marco Aurélio ordered his immediate release.

Indeed, the Supreme Court justice acted according to the law, later affirming in an interview to TV Globo that he made the decision as a member of the Supreme Court, “not as the citizen Marco Aurélio Mello.” “The law is there to be complied with and followed,” he added.

Unsurprisingly, the decision divided opinion among the Supreme Court, legal scholars, and politicians, once more exposing the complexity of Brazil’s penal system.

Shutting the barn door after the drug dealer has bolted

Justice Marco Aurélio Mello’s decision caused such an immediate stir that Chief Justice Luiz Fux moved to suspend his colleague’s decision the very same day, ordering André do Rap to return to preventive detention immediately. He also put the case on the Supreme Court’s docket for Wednesday afternoon, where a majority of justices are expected to vote against Justice Marco Aurélio Mello’s decision.

However, in the interim between the release order and Chief Justice Fux’s suspension, André do Rap had already walked out the front door of a São Paulo penitentiary, where he was driven off by a luxury car after informing authorities he would be staying at a house in the coastal São Paulo town of Guarujá. Once his re-arrest was ordered, police could not locate him in Guarujá, nor at the homes of his family and friends. The Federal Police believes he has fled to Paraguay or Bolivia, where the PCC has established operations.

Political backlash after drug

In Congress, a group of supporters of President Bolsonaro are maneuvering to submit bills to remove the mandatory review of preventive detentions from Brazil’s penal code. Figures close to the president say that Justice Marco Aurélio Mello made an error in his decision, claiming he should have assessed the case at hand and ruled that release was not an option, due to the significant danger posed by the prisoner.

Former Justice Minister Sergio Moro, by way of his press office, declared that he was against the inclusion of the mandatory 90-day review of preventive detentions in January’s new penal legislation. “The article was not in the original draft of the Anti-Crime Bill and I, as Justice Minister, was opposed to its insertion for fear of automatic releases of dangerous prisoners as a result of the mere passing of time.”

Domino effect

At least two individuals in prison for international drug trafficking have already made similar requests for release to the Supreme Court. One, arrested in 2016, is serving a 33-year sentence, while the other is facing 35 years.

As added intrigue to the existing fiasco, online magazine Crusoé revealed that the law firm providing André do Rap’s defense has a former aide to Justice Marco Aurélio Mello among its partners. Asked about this during a telephone interview to CNN Brasil on Tuesday, the justice criticized the question and hung up the phone. “That is defamation. This interview is over,” he said.

So far this year, Justice Marco Aurélio Mello has granted at least 79 release requests based on the provision of mandatory renewal of preventive detentions. The number could be even higher, as a single habeas corpus plea may benefit more than one individual.[/restricted]


Coronavirus daily deaths at the lowest average in months

For the first time since May 7, Brazil’s 7-day rolling average of new daily Covid-19 deaths has fallen below 500 — showing a 28-percent decrease from two weeks ago. After 28 days of stability, the Brazilian death curve has seen a downturn over the past two days.

In today’s Daily Briefing (for premium subscribers) we explain what may be hidden behind the numbers. Read now.

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Brazil Daily

Lifting the lid on lobbying in Brazil

Today, we show you how lobbying works in Brazil. How banks’ woes in the stock market raise red flags about the economy. And coronavirus deaths at lowest since May.

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How lobbying operates in Brazil

The Brazilian Association of Institutional and Government Relations (Abrig) has published[restricted] a document offering a glimpse into the country’s lobbying sector. The activity is yet to be regulated in Brazil — and remains highly stigmatized in a nation so accustomed to corruption scandals.

  • Perhaps that’s why two-thirds of companies who use such services — whether by having its own lobbying sector or hiring outside counsel — are foreign.

Company profile. The top sectors for which lobbying professionals work are not surprising: health and pharma, food and beverages, as well as agro and tech. These are sectors with constantly shifting regulations — and firms want to have a grasp on the changes to come and influence them when possible. 

Startups. Between 2019 and 2020, however, the sector saw a big surge in startups who use such services — this type of company represented 6 percent of the lobbying sector’s clients last year, and has now risen to 9.4 percent. “They are acting preventively to avoid excessive regulation or to try and block new rules that are harmful to their activities,” said Carolina Venuto, chairperson at Abrig.

  • The sector is particularly sensitive to how the new general data protection law will be enforced in Brazil. So far, the government has yet to create a regulatory body to monitor the implementation of new rules on handling citizens’ personal information. Business associations warn that the lack of regulation will lead to unnecessary litigation and insecurity about how the new law will be interpreted.

Dirty word. Since the 1970s, the term “lobbying” has been used to qualify any attempt (usually illicit) to influence public officials, according to Andréa Cristina Oliveira Gozetto, a social scientist specializing in government relations and public policies at think tank Fundação Getulio Vargas. That’s why the sector prefers to call its work “government relations” instead.

Regulation, pero no mucho. Most lobbying professionals are in favor of their work being regulated, but with varying degrees of support. While 80 percent of consultancies and in-company government relations professionals support regulations, only 44 percent of law firms who work in the sector agree — perhaps out of fear that their field of operations may be narrowed.

  • Within the sector, there is also immense opposition to proposals in Congress that would establish a national database of lobbyists. Abrig claims it would limit the sector — saying that, “in a democracy, any citizen should be able to engage in government relations.”

Benchmark. Ms. Gozetto, the social scientist, argues that Brazil should use the Chilean model to regulate lobbying. Chile was the first Latin American country to adopt a regulation on the matter, back in 2014. Now, an online system logs meetings, donations, or any kind of contact between elected officials and lobbyists. Requesting a meeting with a senator or representative goes through this online public platform, shedding light on how interest groups operate.

Pandemic, competition slash banks’ share of stock market index

Between December 2019 and today, Brazil’s major banks have lost one-third of their weight on Ibovespa — the country’s benchmark stock index — according to 6minutos, the content division of C6 Bank. Late in 2019, banks made up 26.6 percent of the Ibovespa portfolio. Now, that share has fallen to just 19 percent.

  • The main reason for this change is that big banks lost a lot of market value during the pandemic. The index for financial companies (IFNC) is the second-worst performing in Brazil, down over 26 percent since the beginning of the year.

Why it matters. Investors’ skepticism about banks has raised some red flags around the Brazilian economy.

  • With the coronavirus crisis and a record-high unemployment rate, investors worry that banks will face massive default rates. The most recent data, from July, actually shows that fewer Brazilians are in default — but the numbers could be misleading, as many of these people were benefited by the coronavirus emergency salary. The impact is expected to be felt from December onward, once the benefit is over.
  • There is a similar concern when it comes to corporate debtors. The government put in place a series of measures to postpone debt payments — which investors fear might only delay the problem, in many cases.

Competition. There is also one positive reason for banks’ struggles in the stock market: increasing competition from fintechs and investment platforms. With lower (or zero) tariffs, these new players are rattling traditional banks and helping the inclusion of millions in the banking system — which could lower market concentration for financial services. This might be bad for shareholders but is certainly positive for the Brazilian economy.

Coronavirus daily deaths lowest since May

For the first time since May 7, Brazil’s 7-day rolling average of new daily Covid-19 deaths has fallen below 500 — showing a 28-percent decrease from two weeks ago. After 28 days of stability, the Brazilian death curve has seen a downturn over the past two days.

Why it matters. The data appears to indicate that the coronavirus spread — which has infected over 5.1 million Brazilians, killing 151,000 of them — could finally be slowing down.

Yes, but … Data collection has been sketchy in Brazil, and death reports tend to go down during the weekends and holidays (October 12 was a national holiday). So it’s hard to know if the reduction in deaths is an accurate depiction of how the virus is spreading. Back in September, Brazil observed a momentary decrease in deaths around the time of the September 7 Independence Day holiday. After that, the curve showed stability for nearly a month.

Vaccine. Mariângela Simão, the World Health Organization’s Assistant Director-General for Drug Access, Vaccines and Pharmaceuticals, said she is “positively sure” Brazil will not have enough vaccine doses in 2021 for a massive vaccination campaign. “The WHO advises Brazil to prioritize health workers and people over 65,” she told CNN Brasil.

What else you need to know today

  • Trade deal. In a push to show that the EU-Mercosur trade deal has support in Europe, the Agriculture Ministry released a statement saying Portugal backs the agreement. Last week, the European Parliament passed an amendment to the common EU commercial policy stating that the deal “cannot be ratified as it stands,” citing environmental concerns.
  • Military. Newspaper O Globo revealed today that, after the Brazilian government decided to make all Venezuelan diplomats personae non gratae in the country, the Army ran military tests in the Amazon, simulating war against a hypothetical “red country.” The operation involved 3,600 troops and happened between September 8 and 22 — on September 18, U.S. Secretary of State Mike Pompeo visited the Brazilian-Venezuelan border, lashing out at the country’s president, Nicolás Maduro.
  • Aid 1. Brazil’s National Development Bank announced it will extend the temporary suspension of debt collection on companies — one of the first measures taken by the government to mitigate the economic effects of the pandemic. The program was set to end in September — but will continue for another six months for specific sectors, including automakers, clothing industries, and hotels.
  • Aid 2. President Jair Bolsonaro signed a decree extending the possibility of companies suspending or cutting workers’ hours and wages for another two months. Back in September, Economy Minister Paulo Guedes let slip that the measure would remain in place, but the extension has only been formalized now. The program is considered to be successful in avoiding millions of layoffs, but has created doubts around how workers’ Christmas bonuses — established by law in Brazil and known as the “13th salary — will be paid, as they are calculated based on monthly wages.
  • Payments. As Brazil gets ready to launch the Central Bank’s instant payment tool PIX, Visa is also beginning to shift its business model in the country. The company is selling fraud prevention and transaction authentication services to PIX participants, in a bid to expand its business beyond credit and debit cards. Only a few days after Brazilians were allowed to sign up for PIX, cybersecurity companies found at least 60 fraudulent websites offering fake registration forms — aiming at getting people’s financial information.
  • Rio de Janeiro. A justice of the Superior Electoral Court issued an injunction suspending the ineligibility of Rio de Janeiro Mayor Marcelo Crivella — who has been convicted of electoral crimes. Wildly unpopular, Mr. Crivella is polling at 12 percent, 15 points below former Mayor Eduardo Paes, who tries to win a third stint in office, after serving as mayor between 2009 and 2016.
  • Supreme Court. With the retirement of Justice Celso de Mello from the Supreme Court yesterday, lawyers representing former Justice Minister Sergio Moro wasted no time in asking Chief Justice Luiz Fux to reassign the case in which President Jair Bolsonaro is investigated for alleged illegal meddling with the Federal Police. If no party in the case had made such a request — Mr. Moro was the one who accused the president — the case would automatically fall into the hands of Justice Mello’s soon-to-be replacement, Federal Judge Kássio Nunes Marques, who was handpicked by Mr. Bolsonaro.[/restricted]

São Paulo postpones decision to return to in-person classes

The city of São Paulo postponed its decision to return to in-person classes on November 3. Mayor Bruno Covas wants to wait for the results of an epidemiological census in the city, which will offer a better glimpse into how the pandemic is progressing in São Paulo.

The result of the survey is expected to be released by October 22 — and only then will the local government decide when municipal schools should return to in-person classes. Starting next week, however, 15 schools will be allowed to hold extra-curricular activities on their premises.

Last week, state authorities placed Greater São Paulo in the second-to-last phase of its reopening plan. If the region doesn’t experience an uptick in cases within 14 days, schools will be allowed to hold in-person classes at 70 percent capacity.

According to a serological survey of children in the city of São Paulo, about 17.6 percent of students of municipal schools have developed Covid-19 antibodies — against 12.6 percent among students of private schools.

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‘Fake vaccine’ being sold on outskirts of Rio de Janeiro

The Brazilian National Health Surveillance Agency (Anvisa) has launched an investigation after reports that a fake Covid-19 vaccine is being sold in Niterói, which neighbors Rio de Janeiro. 

“Complaints were presented on September 25, and we forwarded them to the Federal Police on the very same day,” said Anvisa in a statement.

According to the regulatory body, one unnamed company is selling a product labeled as that being developed by British-Swedish pharmaceutical company AstraZeneca in partnership with the University of Oxford. This potential vaccine — which is still undergoing phase-three trials in several countries, including Brazil — is expected to be one of the first to hit the market, but that is not the case yet.

Brazil is the second-most eager country for receiving a Covid-19 vaccine according to a September poll by Ipsos-Mori — 88 percent of people would take it as soon as it is available. 

As we showed in our October 13 Weekly Report, over 70 percent of people in four major urban centers (São Paulo, Rio, Belo Horizonte, and Recife) even want a vaccine against the coronavirus to be made mandatory. However, enthusiasm for the vaccine is lower among wealthier classes. President Jair Bolsonaro has said on multiple occasions that “nobody can force anybody” to receive immunization.

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Who is Brazil’s new Supreme Court justice?

Brazil’s longest serving Supreme Court Justice Celso de Mello retires from the court this afternoon, 31 years after first occupying his seat. His vacancy has offered far-right President Jair Bolsonaro his very first shot at appointing a justice to the Supreme Court — a process that is often fraught with realpolitik and cynical self-preservation. However, Mr. Bolsonaro’s pick — 48-year-old federal judge Kassio Nunes Marques — came as something of a shock to political pundits in Brasília.

Despite having promised an ultra-conservative and “extremely Evangelical” appointment to the Supreme Court, Jair Bolsonaro selected a justice with long-term links to the well-heeled establishment of Brazilian politics — a group that the president himself railed against throughout his campaign and first year in office, much to the delight of his supporters.[restricted]

Indeed, the process of agreeing on Kassio Nunes Marques as Brazil’s newest Supreme Court justice was a team effort, involving President Bolsonaro sitting down with a number of political actors who his more ideological fans abhor. On September 29, Senate President Davi Alcolumbre met with Mr. Bolsonaro, with the former telephoning current Supreme Court Justice Gilmar Mendes to organize a sit-down with the head of state. Messrs. Alcolumbre and Mendes, it should be noted, have both been targeted and made into effigies by pro-Bolsonaro protesters during demonstrations as recently as May.

Soon after, Jair Bolsonaro arrived at Justice Mendes’s house in Brasília, accompanied by Kassio Nunes Marques. Fellow Supreme Court Justice Dias Toffoli — another bête noire of the president’s ideological base — was also in attendance. As it happened, Mr. Bolsonaro and Justice Toffoli were pictured hugging after the meeting, dividing the president’s supporters on social media.

Two days later, Mr. Bolsonaro declared the appointment of Kassio Nunes Marques, who will now have to pass a largely perfunctory confirmation hearing in the Senate.

A bolt from the blue

The choice of Kassio Nunes Marques — who intends to go by the title Justice Nunes Marques once sworn in — took almost everyone in Brasília by surprise. He did not feature on even the most exhaustive lists of favorites for a Supreme Court pick and he quickly angered President Bolsonaro’s ultra-conservative supporters, to which the head of state’s choices have largely been beholden so far.

First and foremost, Nunes Marques’s political affiliations were called into question. While on the one hand he was branded as a lackey of the so-called “Big Center” — the large establishment caucus within Congress, made up of small to medium-sized parties willing to buy and sell their support — some pointed to his alleged links to the center-left Workers’ Party, Jair Bolsonaro’s declared enemies, with whom fraternization is seen as a cardinal sin within Bolsonarism.

Indeed, in 2011, Marques Nunes entered the Federal Regional Appellate Court of the 1st Region, in Brasília, after being appointed by former President Dilma Rousseff, of the Workers’ Party.

He was also involved in an emblematic case in 2019, when he overturned a trial court decision to suspend the purchase of wine and lobsters for a Supreme Court function. The case was capitalized upon by supporters of President Bolsonaro — including his politician sons — as an example of the excessive privileges enjoyed by the country’s highest court, which they intended to have shut down.

In another high-profile trial dating back to 2015, he voted in favor of suspending the deportation of Cesare Battisti, the former communist activist who was sentenced to life in prison for quadruple homicide in his home country of Italy, before fleeing to Brazil to receive political asylum from former President Luiz Inácio Lula da Silva.

Under Jair Bolsonaro’s government, Mr. Battisti was eventually arrested and extradited to Italy.

The Cesare Battisti case held particular importance for the ideological platform of the then-nascent Jair Bolsonaro government. As a former member of a far-left terrorist group in Italy, and having been given shelter by Lula, arresting and deporting Mr. Battisti was a message to the Brazilian left, as well as being a way to further the government’s foreign policy goals.

The man in the middle

Despite allegations of links to the center-left Workers’ Party, Nunes Marques’s most credible alliances do indeed lie with the Big Center. Indeed, his wife Maria do Socorro has worked under four senators from the couple’s home state of Piauí, all of them from traditional Big Center parties. Indeed, she was set to double her salary just as her husband got his own big break, when the Progressistas party lined her up for a commissioned post in the Senate but backed down once the news had been published by Rio de Janeiro paper O Globo.

The Progressistas party is presided over by Ciro Nogueira, who is now a close ally of President Bolsonaro and one of Mr. Nunes Marques’s biggest backers. Last year, Mr. Nogueira praised the soon-to-be Supreme Court justice during a trial session. “Our Kassio [Nunes Marques] is a highly respected figure in the legal world of today, I am certain that he will reach the high courts, either the [Superior Court of Justice] or the Supreme Court. He is a much liked and respected individual.”[/restricted]